The USD/CHF pair is trading around 0.8040 in Wednesday’s European session, struggling to extend its recent two-day winning streak. The US Dollar (USD) is under renewed pressure as market participants grow increasingly confident that the Federal Reserve (Fed) will deliver an interest rate cut in September. According to the CME FedWatch Tool, traders are now pricing in more than an 89% probability of a 25-basis-point (bps) cut, slightly higher than Tuesday’s 86% odds. This rising expectation weighs on the greenback and limits further upside momentum for USD/CHF.

Nonetheless, the pair has found some support from robust US Treasury yields, which continue to attract capital inflows and boost demand for the USD. At the time of writing, the two-year yield stands at 3.66%, while the benchmark 10-year yield is holding at 4.29%. These elevated yields reflect investors’ demand for US assets, preventing the dollar from sliding more sharply against the Swiss Franc.

Later in the North American session, traders will turn their focus to the US JOLTS Job Openings report and the Fed’s Beige Book, which may provide fresh clues on economic conditions and monetary policy outlook. The spotlight this week will remain on key employment data, including the ADP Employment Change, Average Hourly Earnings, and the Nonfarm Payrolls (NFP) report for August, all of which could heavily influence the Fed’s September decision.

On the Swiss side, the Franc is under some pressure as speculation grows that the Swiss National Bank (SNB) could consider cutting rates further into negative territory at its upcoming meeting. With Swiss inflation in July holding well below the SNB’s 2% target, policymakers face room to loosen policy if required. Traders will closely watch Thursday’s Consumer Price Index (CPI) release, expected to show an annual gain of just 0.2% with no monthly growth, for additional cues.

Overall, the USD/CHF pair remains in a tug-of-war between Fed-driven downside risks and support from strong US yields, while Swiss monetary policy expectations add another layer of volatility.

Trade Idea:

Consider selling USD/CHF below 0.8050, targeting 0.7980, with a stop-loss placed above 0.8090, as Fed rate cut expectations outweigh temporary yield-driven support.